1. Be transparent about succession
Succession is perhaps the most critical challenge for a family business. It’s essential for family business owners to consider succession early on and take the appropriate steps to ensure that intentions are transparent and widely known by the family. Succession can be a key aspect to the survival of a family business, especially if there’s an unexpected illness or death, or if the family is caught up in emotional issues.
Having a detailed succession planning process will help your company identify and develop executive talent to fill leadership positions with the right people and to ensure the business’s continuity. In addition to management succession, other issues you’ll want to consider include assets that may be in an estate or trust, including both business and non-business assets. Addressing these challenges early on will mitigate the risk of conflict down the road.
2. Address a family/work-life balance
The issues faced by a family business are often more diverse and complicated than those faced by other companies. “Family” and “business” are often intertwined into a mix of business issues and concerns, generational differences and ongoing family dynamics. Personal problems, emotional and financial challenges among family members can greatly impact the day-to-day operation of the business. It’s important to set appropriate boundaries. Effective communication is necessary to be upfront about roles and responsibilities and to actively manage family challenges both on and off the clock.
3. Think about talent outside of the family
Leading a multigenerational family business can be complicated, and knowing who you can turn to for support, experience and knowhow can be tricky. Making use of expertise from outside the family can provide a greater depth of knowledge and experience, resulting in better decision-making.
Thinking about bringing in outside representation can offer an objective look at the business. For example, board members can provide valuable insights to help you re-evaluate the business plan and prioritize areas that need improvement. This approach to family business governance has proven to be effective for a healthy, long-lived family business that will remain true to its mission and family values.
4. Ensure the right people are in the right roles
It’s important for family members in the business to know their role and how they fit into the business. Play to your children’s strengths and allow them to work in the facet of the business that puts their strengths to best use. This way, every child will have a niche to focus on, each will be able to operate without anyone stepping on somebody’s toes, and all children will add value to different operational areas of the business.
Just because you run a business doesn’t mean your children are cut out for the business world — or that they even want to run the business. Have a frank discussion with your children regarding their career aspirations. Understand where they see themselves fitting into the business and don’t just assume they’ll run the company.
5. Prepare the next-generation leader
Being a great leader means understanding all facets of the business and welcoming opportunities to get educated on aspects of the business they may not know much about. A great way to set up your successor for success is to surround them with a strong support system of family members and others who offer different perspectives of the business.
Another helpful way to prepare your next-generation leader is to allow them to experience working for another company. That can give them new experiences, help them develop and enhance their skillset and increase their credibility in the eyes of those inside and outside the family business. Along with outside experience, training and education programs are critical elements of preparing successors for both ownership and leadership succession. Giving them the ability to learn from knowledgeable resources and providing the opportunity to share experiences with peers can prove invaluable.
Almost all companies start out as family businesses, but those that master the challenges inherent in this form of ownership can grow into successful enterprises that can survive across generations. Companies that implement effective planning and governance will ensure the success of their business and help preserve wealth for future family leaders.